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On January 1, 2018, Naw Corporation leased a piece of machinery from Hoffherr Machinery's. The lease is a(n) 8 year, non-cancellable lease that requires lease

On January 1, 2018, Naw Corporation leased a piece of machinery from Hoffherr Machinery's. The lease is a(n) 8 year, non-cancellable lease that requires lease payments of $7,000 due at the beginning of each year. The lease has been determined to be a capital lease because at least one of the classification criteria has been met. Naw Corporation needs to determine the present value of the lease payments so that they can record the asset and the liability at lease inception. Hoffherr Machinery's implicit rate of 9% is known to Naw Corporation. Complete the following from the perspective of Naw Corporation.

Which of the following financial statement items is impacted in this transaction?

Bonds PayableLeases ObligationLeases ReceivableNotes ReceivableProjected Benefit Obligation

The problem is solving for:

Future ValueInterest AmountPayment AmountPeriod of TimePresent Value

The calculation involves:

A Single SumAn Annuity DueAn Ordinary AnnuityDeferred Ordinary AnnuitySingle Sum & Annuity DueSingle Sum & Ordinary Annuity

EXCEL

Excel Formula

=

Annual InterestCompoundedFVNperPVPmtRateType

(

Annual InterestCompoundedFVNperPVPmtRateType

,

Annual InterestCompoundedFVNperPVPmtRateType

,

Annual InterestCompoundedFVNperPVPmtRateType

,

Annual InterestCompoundedFVNperPVPmtRateType

,

Annual InterestCompoundedFVNperPVPmtRateType

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Variables

=

Annual InterestCompoundedFVNperPVPmtRateType

(

,

,

,

,

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Total

=

Date of Delivery

Accounts

Debit

Credit

To record the inception of the lease

To record the first lease payment

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